Annual Review and Outlook

2017 will be remembered as the year of the new alliances. Most carriers in this day and age have joined an alliance to share expenses, cut costs and expand their services. As alliances are a fairly new concept, the first go round for most of us in this industry was a learning experience. Now that we have had some experience under our belts, most of us are going into these new alliances with more knowledge of what works and what doesn’t.

Digital solutions are creating a more visible, predictable and efficient environment for containerized trade, the backbone of global commerce. Platforms that aggregate and provide secured, channeled access to key shipping data will give us the ability to extend the line of sight that cargo owners, marine terminals, port-side service providers, and asset managers have over millions of container moves.

Emerging technologies and operational changes are requiring innovative thinking, which sometimes comes at a great cost. Some would say it’s the price to pay for progress. Others will ask where the money will come from. Public-private partnerships, federal and state funding, and smart business practices will ensure financial stability to support vital projects to meet current and future demands.

Politics, coupled with the ongoing threat of global terrorism, is creating greater demand for global trade management software than ever before.

There is little doubt that the pace of change in the transportation and logistics space is accelerating. Regulations, a lack of adequate infrastructure investment, and a shortage of willing, compliant workers threaten to create a freight transportation capacity shortage in 2018 that could be severe enough to constrain the overall rate of macroeconomic growth across the US.

US seaports require the continuation of existing tax incentives and grant programs to become more efficient and remain competitive in this new age of alliances, consolidation, and mega-ships. I am hopeful that Congress can identify long-term infrastructure financing strategies that provide tools to encourage and sustain seaport growth.

The Gulf region, and especially Florida, are also major players in the trans-Pacific trade with Asia. Ports have expanded their post-Panamax capacity, and are well positioned to accommodate upgraded services, with room for additional expansion.

Does size matter, and, if so, where will it take us?

The trickle-down effect of cliner onsolidation has really yet to manifest as everyone from port authorities, terminal operators, stevedoring companies, railroads, trucking, logistics companies, organized labor, maintenance companies, IT providers, BCOs, and NVOCCs, etc., consider how to adjust. Continually improving the efficiency of our global supply chain is in the interest of all stakeholders, and it will indeed evolve. How we achieve this continued efficiency will depend in part on the suppliers and customers of the liner carriers.

With the consolidation of carriers and the formation of mega-alliances, there is an opportunity to concentrate volumes and, with time, evolve into an ongoing redesign of vessel networks that will challenge the ports, marine terminals, and intermodal operators in a significant way.

The intermodal equipment provider’s world has changed dramatically and is squarely positioned to continue to do so this year and beyond.

The decade-old imbalance between cargo demand and multipurpose/heavy-lift capacity continues with no forecast for any significant change. The prospect of stagnant cargo flows has now been accepted by many industry insiders as the new norm. Even with negligible new ship orders, the forecast for improved earnings is impossible to predict, particularly in a market where so many vessels continue to be supported by banks unwilling to call non-performing into default.

As a large, incredibly complex, and highly fragmented industry, global logistics is in transition, being under enormous and growing pressure to improve its efficiency and performance.

An outlook of cautious optimism for 2018 looms in the container shipping industry as everyone keeps watch on challenges from oversupply while signs may indicate healthier demand growth in the overall market environment. Many carriers will also need to observe the rapid changes in the e-commerce, IT, and digitization space to invest in the right technologies that would give them the competitive edge and ability to provide superior services and enhance operational integrity.

E-commerce has been and will continue to be the dominant trend for the foreseeable future. Increased volumes and faster delivery require a comprehensive supply chain from import facilities to fulfillment and sortation centers to last-mile depots. This is requiring developers and investors to understand the needs of e-commerce vendors and provide new solutions to meet the delivery expectations of the consumer.

Are we ready for disruption? At our recent Supply Chain Summit in Singapore, Jimmy Koh, managing director of United Overseas Bank, made startling observations about the sharing economy.

There are three areas that are impacting our client’s business that we will be focused on in 2018: truck capacity; the instability in the ocean freight market; and exceeding the On-Time, In-Full (OTIF) policies with retailers.

Drivers play an important role in keeping freight moving and deserve more respect, for instance being treated like a “customer” at intermodal terminals and customer locations. Our industry needs to work to maximize their utilization as they become an even more valuable supply chain component after ELD regulations kick in and driver compliance is fully enforced. Delays at ramps, ports, and customer destinations will need to be reduced and ultimately eliminated.

The constant evolution of technology is here to stay. To be successful in the future, companies need to embrace technology solutions that are right for their business and harness the data that is produced to inform decision-making and improve the performance of the intermodal supply chain.

Global climate change impacts merchant shipping and is exacerbated by it. Forward-thinking governments and investors must find ways to support the research needed to advance and deploy fossil fuel alternatives.

Cargo in transit (by rail and truck) is one of the largest risks covered under inland marine insurance. Cargo theft is a major concern.

As we look into 2018 and beyond for the North American rail freight industry, we continue to have rather limited visibility beyond the short term. Commodity mix changes aren’t complete; market share opportunities remain, but technological challenges are emerging.

As a tumultuous year in container shipping ends, there is hope that we may be able to build a more sustainable model that averts the traditional peaks and troughs of supply and demand that have impacted the industry in recent years.

This year is going to be a pivotal one for technology decisions.

Buying and selling online, or via mobile devices, is estimated to exceed $8 trillion worldwide in the next few years. What does that mean to all of us?

Four areas we see impacting global supply chains the most include the ocean carrier market, air cargo market, cyber security, and trade agreements.

Fast-changing consumer habits have put businesses under intense pressure to focus on last-mile delivery.

Regardless of what type of change is occurring, speed, and agility are imperative and an area of focus for our business.

The rapid changes in retail trade and industry dynamics we have experienced have had a profound impact upon the landscape of supply chains and the industrial real estate sector that supports them.

If there is one thing that is certain for 2018, it is that the rapid pace of change in our industry — particularly in the realm of technology — will only continue to rise.

The transport and logistics industry has always been subject to changes in trade and regulation.

2017 was a year of great disruption for global trade professionals.

Mega-ships and industry consolidation are seen by some as an evolution toward greater efficiency, but what impact are these trends having on ports that are focused on more niche services or have infrastructure limitations?

In 2018, the statement, “Innovation is doing more with less measurably” by Futurist Alex Lightman, can be implemented easier than ever before. With concepts like blockchain, digital brokerages, drones, and AI at our disposal with the click of a button, innovation and driver for efficiency in the supply chain is rapidly becoming the norm. Blockchain companies alone have received over $1.4 billion in investment, and that is just the start. Shippers and brokers need to find ways to leverage these companies and investments. Naysayers or those who choose to take a “wait-and-see” approach will be overlooked as the rate of change is just too quick, and the return on investment of adoption is just too great. We have always looked and found ways to be more efficient than the year before, but now the ease of adoption provides our companies are real, concrete, competitive advantage. Adoption will propel these companies to move past the competition while simultaneously contributing to the overall efficiency of our marketplace. Innovators in our space are built on efficient communication, sharing of assets, and ideas. 2018 will again prove that the group is more powerful, and a year where we will see huge advancement because our industry is collectively embracing methodologies that improve our companies and drive out inefficiencies from the supply chain.

While the past few decades have been based on system integration through EDI for shipment transactions and required long development cycles to make system updates, we see a dramatic shift to cloud-native development and APIs for new applications and advanced analytics in 2018.

The changes and industry dynamics that are making the most impact at seaports are the reordering of the ocean carrier alliances and the reorganization of ocean carriers themselves. Combine that with the addition of larger mega-ships to carrier fleets, and you have a great deal of challenges.

In today's supply chain, it’s clear that physical scale and buffer stock are no longer the winning formula, and enterprises must utilize data intelligence and AI to transform their supply chains.

They say that an elephant never forgets, and neither do motor carriers who now have the upper hand in a market where there is very tight capacity in the truckload and less-than-truckload sectors.

2018 will be a very challenging year for manufacturers and retailers as the service-level demands of their customers increase, while transportation capacity tightens, and transportation costs rise. There will be no relief from their own C-suite in terms of profit expectations in an environment where it is very difficult to pass on price increases to customers.

Competition is good for everything that it brings: efficiency, innovation, customer choice. But there’s sometimes an unwelcome byproduct of competition: indigestion. Ports and terminals have a touch of it right now. That’s because there’s tense competition underway for cargo. There are too many gateways chasing containerized trade volume that’s growing … but not growing fast enough to absorb capacity. It could make a person queasy. The antidote for this heartburn? A healthy dose of upgrading. We’ve got to step up our game if we’re going to compete for cargo. That means improving efficiency and developing new capabilities. Fail to do that, and we risk losing market share. So what is it that ocean carriers and cargo owners want from port authorities and terminal operators? Here’s what we’ve learned working in close proximity with our Port Efficiency Task force over the past two years: Speed and reliability: Customers want extended hours, appointment systems, and turn-time metrics to hasten cargo flow. Big ship readiness: More than just deep water, customers demand fluid landside operations and infrastructure — starting with taller cranes — to handle mega-ships. Holistic supply chain support: Customer requirements don’t stop at water’s edge; we’ve got to provide the range of logistics services from onsite transloading to cold chain capabilities. Because we’re competitive, we’ve spent the past two years working on these improvements. Cranes are going higher. Terminal gates are open at night. This year, we’ll open a 283,000-square-foot refrigerated distribution center. In 2019, our 440,000-square-foot transload center opens. The Northern California market is reasonably well-insulated. It can’t be easily served by other US ports. That helps us protect market share. But it’s no reason to relax. We’ve got to keep improving … got to compete if we intend to grow our business. That’s the message for all port operators in these stomach-churning times.